Dow gains 260 points as stock market jumps on news out of China

Stocks rebounded sharply Monday as the global market welcomed recent statements by Chinese leaders, who are looking to boost that country’s economy through stimulus and increased foreign trade.

The Dow Jones Industrial Average gained more than 260 points, or 1.5%, to inch closer to a return to the 18,000-point mark. The blue-chip index suffered major losses Wednesday, when it dropped more than 290 points as part of a market-wide sell-off following poor economic reports and investors’ ongoing concerns about the strong U.S. dollar. Last week’s sell-off turned the Dow negative for the year, but Monday’s gains market the Dow’s best daily rise since early-February, putting the index in the black for 2015.

The S&P 500 and the Nasdaq composite also received boosts on Monday, with each index gaining more than 1%. The tech-heavy Nasdaq’s gains put the index roughly 100 points away from the all-time record close (not counting inflation adjustment) it last touched shortly before the dot-com bubble burst in 2000.

The Shanghai composite gained 2.6% during Monday trading after the Chinese government revealed details of a new initiative meant to expand trade between the country and others across Asia, Europe and Africa. Meanwhile, over the weekend, the head of China’s central bank spoke about the growing strength of the U.S. dollar and hinted that there could be further economic stimulus measures to boost the country’s slowing economy.

Monday’s gains in the US came amid a flurry of merger activity from the healthcare industry that sent several stocks soaring. UnitedHealth UNH said Monday it is paying $12.8 billion for pharmacy benefits manager Catamaran TK, while Teva Pharmaceuticals TEVA announced its own $3.2 billion deal for Auspex Pharmaceuticals ASPX. Another pharma company, Hyperion Therapeutics HPTX, will be acquired by Ireland’s Horizon Pharma HZNP for $1.1 billion.

China pursues cyberpolitics by other means again with Github attack

Late last Wednesday, a San Francisco-based website used by software developers began being overwhelmed with requests in a classic type of attack that appears to be the work of Chinese hackers, according to a report.

The so-called distributed denial of service (DDoS) attack that targeted Github was directed at pages that linked to copies of websites banned in China, including the New York Times’ Chinese site, the Wall Street Journal reported yesterday, citing anonymous cyber security sources.

The paper said Internet traffic intended for Chinese search engine Baidu BIDU was instead redirected to Github pages linking to content banned in the country. In China, Github is just as popular amongst coders as it is in Silicon Valley and because the site in encrypted, the sensitive content it linked to —sites run by the New York Times and Greatfire.org—can’t be selectively banned by Chinese censors without taking down the entire site. When Chinese censors briefly blocked the site in 2013, Chinese coders were up in arms.

On its blog, Github said it has faced “some sophisticated new techniques that use the web browsers of unsuspecting, uninvolved people to flood github.com with high levels of traffic” and concluded that the intent of the hack was to persuade the web service to remove “a specific class of content.”

If the hack is indeed the work of China, it would be the latest episode in an increasingly hot war. Two weeks ago Greatfire.org complained of a similar attack after it was featured in a WSJ story about Internet users using foreign cloud services, including those run by Amazon.com AMZN and Microsoft Corp. MSFT, to circumvent China’s firewall. Greatfire, an activist group fighting Chinese censorship, has created so-called mirrored websites accessible from within China of those sites blocked by the firewall, including Google.com and newsites run by Reuters and the New York Times.

Earlier this year, hackers gained access to Social Security numbers and other information of 80 million customers of health insurer Anthem in what U.S. investigators later said was likely a Chinese state-sponsored operation.

Military watchers said recently that a document from China’s People’s Liberation Army acknowledges for the first time the existence of hacking groups within the PLA–something that has been routinely claimed by the Pentagon and other U.S. agencies for over a year.

Most analysts expect demand will be strongest for Apple’s aluminum and steel watches, which start at $349 and $549, respectively. Dediu believes Wall Street may be underestimating the intangible appeal of a $10,000 gold watch. Especially one given as a gift. Especially in China, with its rich tradition of over-the-top gift giving.

The gold watch has something else going for it. Unlike the value of a Rolex, say, which can range from a few thousand dollars to tens of thousands, the price of the Apple Watch in each of its global markets is fixed; it’s listed on the website.

“It’s like currency,” says Dediu. Factor in local taxes, and you can calculate with some precision what he calls the “global arbitrage opportunities.”

For example, the entry level gold watch — 38mm 18-Karat Rose Gold with a white sport band — retails in the U.S. for $10.000. The same watch is listed on Apple’s Chinese website for RMB 74,800 ($12,045). Beijing imposes a 17% value added tax. Hong Kong does not.

“If someone smuggles one of these into China,” says Dediu, “they’ll pay for their flight ticket and then some.”

He reports that in Boston there were still queues for the iPhone 6 Plus in January, almost five months after it launched. “They’re mostly Chinese,” he says. “They’re doing it as a business.”

It can be a rough business, as a documentary film shot outside Apple Stores in New York City last September demonstrated. It might be even rougher in April, when buyers could be carrying bundles of cash in units of $10,000.

That’s cash that will go almost directly to Apple’s bottom line. Dediu estimates that the margin on a $10,000 gold watch could be as high as 90%.

“I wouldn’t be surprised if in the first few months the demand for gold is far, far higher than we imagined,” he says. “They’ll just be out of stock, permanently.”

ON THE OTHER HAND: 9to5Mac’s Mark Gurman, with good sources in Apple retail, says there will be no lines for the gold Watch.

No Waiting In Line: Unlike stainless steel Apple Watch and Apple Watch Sport customers, those seeking to buy the Apple Watch Edition will not have to wait in a line. Sources say that potential Edition buyers will have priority access to assistance, effectively skipping the line of other waiting customers. Experts will be able to help a couple of customers try-on Watches simultaneously, unlike standard employees who will simultaneously help as many stainless steel and Sport customers as necessary.

Cruise giants Carnival, Royal Caribbean doubling down on China

Buoyed by the explosive growth of the cruise industry in China, the world’s two largest cruise operators, Royal Caribbean RCL and Carnival CCL are redoubling their presence there.

Carnival, which on Friday raised its 2015 profit forecast on the strength of better than expected advance bookings, expects the overall number of outbound cruise passengers from China to hit the 1 million market for the first time in 2015, and serve almost half of those.

Chine remains a much smaller market for the cruising industry than the United States or Europe, but interest in taking to the seas as a middle-class vacation option is surging in China, and buoying the whole industry.

“China presents the next great frontier for cruising,” Carnival CEO Arnold Donald told Wall Street analysts. “It’s just a matter of time before China becomes the largest cruise market in the world.”

According to data from the United Nations World Tourism Organization, the total number of trips abroad by Chinese citizens rose about 10% to 109 million in 2014, with spending up about 17%. And more of that is going to cruises: the number of cruise passengers originating from China rose 79% between 2012 and 2014.

Carnival currently has four ships based in China. The company recently signed a memorandum with state-owned China Merchants Group to look into forming two joint ventures that will build cruise ports and ships.

Meanwhile, Royal Caribbean said earlier this week that Tianjin, a city of 10 million about 100 miles from Beijing, will be the new home for its third Quantum-class ship (those with the most bells and whistles like space observation decks) starting in April 2016. It will be the fifth China-based ship in the company’s fleet and its first to be based in China from the get-go. Last year, Royal Caribbean decided to redeploy its newest ship, the 4,200-passenger Quantum of the Seas, to Shanghai year-round as of this spring, after only six months cruising New York-Caribbean trips.

To funnel more Chinese passengers to its ships, Royal Caribbean is looking for partnerships with local travel companies. In the fall, it struck a deal with Chinese online travel company Ctrip, which is the biggest seller of its cruises there.

And to make it clear to the China government, whose cooperation Royal Caribbean and its rivals need to get more infrastructure that lets large ships dock in various cities, that its plans to keep investing in China. Royal Caribbean said this week it is looking into building Chinese dry dock facilities and developing logistics centers to supply its ships deployed in the region. It is also considering programs that would bring thousands of North American vacationers to visit China by cruising.

While China is still Royal Caribbean’s No. 3 market, after the U.S. and Europe, it is clear executives see the Middle Kingdom as a major growth engine.

“Potential growth here is greater than the U.S. market,” Michael Bayley, president and chief executive of Royal Caribbean’s international operations, told the Wall Street Journal in Beijing earlier this week.

Gasp! China admits to having cyber warriors

So China has at last admitted, albeit obliquely, that it sponsors offensive hacker units—martial cyber corps, if you will. It’s an unprecedented confession for the state, whose persistent denials have been met for years with the diplomatic equivalent of, “Yeah, right.”

China’s admission, however unsurprising, is a rare ray of light piercing the murky fathoms of international cyber warfare. The news arrived in the most recent edition of The Science of Military Strategy, a much pored-over document produced by China’s Academy of Military Sciences, the top research institute of the country’s military. Though published at the end of 2013, the latest version took time to trickle out to the global community and to be translated from the original Mandarin. But inside, readers found a treat.

“This is the first time we’ve seen an explicit acknowledgement of the existence of China’s secretive cyber-warfare forces from the Chinese side,” Joe McReynolds, a researcher at the Center for Intelligence Research and Analysis, tells The Daily Beast. “It means that the Chinese have discarded their fig leaf of quasi-plausible deniability.”

The perpetual parries of Chinese officials on the subject of cyber war have long frustrated the global security community. But the days of outright dismissing inquisitions and accusations of hacking—the waving of hands with a Jedi-like flourish and the ineffective uttering of These are not the hackers you’re looking for—seem to have expired. China has fessed up.

Admission of capability is a first step towards progress in the relationship between US and China. CN PR guys will need new scripts though.

The existence of Chinese hacking teams has morphed from an open secret into a bewildering, if not irritating, joke. Despite the historic nature of last week’s buried announcement, no one in the industry appears to be surprised by it—though it has left some security experts feeling slightly vindicated. Fortune, noting that cyber warfare is an exceedingly important element of what we call “The new cold war on business,” took the opportunity to speak with veterans of the security world who have been following China’s cyber antics for some time. They shared some choice words.

“Oh my god,” remarked Dmitri Alperovitch, co-founder and CTO at security firm CrowdStrike, with mock surprise. “We’ve just found out the sky is blue.”

In all seriousness, one can understand Alperovitch’s cynicism. He’s the author of the 2011 “Shady rat” report—a white paper exposing an extraordinary and extensive (allegedly state-sponsored) hacking campaign—and former vice president of threat research at McAfee. There, he had been tracking the purported spies’ activity for at least five years before taking it public. Alperovitch says the company, then owned by Intel INTC, would not permit him openly to conjecture about the attack’s attribution, since its business had major operations in China. “Citing McAfee company policy, he refused to speculate on which country was behind Shady rat,” Vanity Fair reported at the time.

Alperovitch recalls that at the time the white paper appeared, people questioned it, proposing hacktivist or organized criminal groups as plausible culprits. Russian cyber security firm Kaspersky Labs openly dissed the report’s claims and implications, dubbing the investigation “shoddy rat,” and concluding its blog post review with a terse Q&A:

Was it backed up by a state?

No.

Does Shady RAT deserve much attention?

No.

Alperovitch brings his memory of the experience to bear when considering China’s latest disclosure. (The past incident appears to have left some bitterness left on his palate.) “Not even four years since that report and now its become common knowledge that almost everyone in the security community accepts as fact,” he says. “It’s incredible how quickly things have changed.”

At CrowdStrike, however, Alperovitch has continued to pursue the putative overseas attackers. Last year, his company released a detailed attribution paper on one of the People’s Liberation Army’s alleged Shanghai-based hacking units: Putter Panda. (See also: Deep Panda and Hurricane Panda.) Even though he says it’s long overdue, China’s crack at an admission—of capability, not culpability—is a first step toward moving the conversation forward, Alperovitch says. Whereas before he described China as holding a “frankly nonsensical position,” and of its officials as being “masters of denying the most obvious facts,” he believes the new information may allow nation states now to begin to establish the norms of behavior in cyber space.

Of course, he is far from the only security expert to meet the so-called revelation about China’s electronic forces with lassitude. Dave Merkel, CTO at security firm FireEye FEYE, is equally unsurprised by the report describing China’s militarized hacker teams. “It’s not news from my perspective,” he tells Fortune, mentioning that upon hearing the news he “kind of yawned” and thought “so what?”

“Hooray, China said it!” he hoots, before quickly yanking his faux-celebration back down to Earth. “We’ve been dealing with this for years. It doesn’t change anything.” Indeed, in 2013, FireEye’s forensics division Mandiant, then a separate firm, released a report outing five Chinese nationals as having, for nearly a decade, repeatedly stolen U.S. trade secrets. (Here’s Fortune‘s cover story on that report.) While the Chinese government still refutes the firm’s assertion, the U.S. Justice Department found it convincing enough to indict the military members on charges of cyber espionage and hacking, an unprecedented move for a foreign government. China’s Foreign Ministry, copping to no wrongdoing, averred: “The Chinese government, the Chinese military and their relevant personnel have never engaged or participated in cyber theft of trade secrets.” Well, then.

Amit Yoran, RSA president, adds his voice, too, to the proliferating “Well, duh” chorus accompanying the news of China’s hacking program. “Shock and surprise!” he exclaims, betraying ample sarcasm before assuming a more moderate tone. “I shouldn’t make too much fun of it. I think it’s significant.” Yoran, for one, is eminently skeptical of any country that denies it engages in cyber war; that’s simply the way states must operate nowadays. “Every government, whether they admit it or not, is active in this space,” he tells Fortune.

Although China’s disclosure comes as a watershed moment for the concealed world of cyber warfare, in reality, it doesn’t change much. Everyone has known about the state’s cyber, uh, secret for a long, long time. “I have a really bifurcated feeling,” Yoran deliberates aloud, summing up what might be considered the collective reaction of many in his field. “On the one hand I’m excited to see some public recognition that it’s going on. On the other hand, it’s a little bit of a ‘No kidding.'”

Next up, according to the experts Fortune spoke with, is for China to admit not only the existence but the extent of its espionage. “They’ve acknowledged the presence of the capability, not the degree of the activity,” Merkel says. As far as the state’s alleged practice of attacking foreign companies to pilfer intellectual property, and then providing those secrets to Chinese companies so they have an economic advantage, “I certainly don’t see them owning up to that in any form or fashion,” Merkel says.

As Chinese cyber war theorist Wei Jincheng wrote in 1996, “An information war is inexpensive, as the enemy country can receive a paralyzing blow through the Internet, and the party on the receiving end will not be able to tell whether it is a child’s prank or an attack from an enemy.” In the 2010s, the days of child pranking are over. Nation states have mobilized, marched and encamped segments of the internet—and they’re admitting it, presumably because the alternative is no longer tenable. While the existence of China’s digital troops comes as no surprise, the news may advance an international dialog that has been lacking around cyber war.

Then again, two days after the Daily Beast story appeared, China’s Ministry of National Defense denounced a Financial Times report that the country’s military had breached a web domain management site, Register.com. “China firmly opposes any type of cyber attack and punishes such crimes in accordance with the law. The Chinese military has never been involved in any hacking activity to steal business secrets,” the ministry reportedly told the Global Times, a state-run Chinese newspaper. The ministry added, indignantly: “The U.S. should explain its large-scale and organized cyber spying and phone tapping activities to the international community as soon as possible, rather than making irresponsible accusations.”

Macy’s “studying” China closely, with eye on international growth

Macy’s M is a quintessential All-American brand: its Fourth of July and Thanksgiving Day parades are touchstones of U.S. culture, and its Manhattan flagship store a must-see on any tourist’s list alongside the Statue of Liberty.

But the U.S. retailer has been taking a closer look at international markets lately in a bid to sustain its years-long growth streak at a time of limited domestic opportunities for department stores.

Macy’s started e-commerce for international shoppers in 2011, including Chinese residents, encouraged by the heavy traffic to its websites from shoppers living abroad. Then last year, Macy’sannounced it would open a four-level, 205,000 square-foot store in Abu Dhabi in the United Arab Emirates in 2018, its first store abroad. (Its sister chain, luxury retailer Bloomingdale’s will open a second store in the UAE that year.)

These moves echo those of competitors such as Nordstrom JWN and HBC’s Saks Fifth Avenue which are opening stores abroad (Canada) and beefing up their international e-commerce capabilities as the fight for shoppers spills across borders, even for department stores which have traditionally been solely domestic businesses.

While best-in-class among its mid-tier department store peers, ahead of J.C. Penney JCP and Kohl’s KSS, the Macy’s juggernaut has been slowing. In 2014, its sales grew a modest 0.6% to $28.1 billion, making it clear the retailer needs to branch out to grow. To that end, Macy’s has bought luxury beauty and spa services retailer Bluemercury and is looking into plans to launch an “off-price” discount chain. It has also meant going all-in at examining overseas markets more closely, China in particular.

“We have spent a lot of time studying China,” Macy’s Chief Financial Officer Karen Hoguet said at a conference this week, adding though that “we haven’t figured it out yet.” She has been to China twice, while CEO Terry Lundgren has visited China regularly.

As retailers like Tiffany & Co TIF and Coach COH can attest, China can be a bonanza for Western brands. But those are specialty brands. The competition for department stores is more intense given that many brands they sell are carried by retailers worldwide.

Macy’s has been trying to figure out China for some time but has always approached the Middle Kingdom cautiously. In 2012, Macy’s took a minority stake in Chinese retail company VIPStore as one way in. But its efforts have had some snafus. In late 2013, Macy’s shelved plans to sell a private-label brand online in China the following year, saying it needed to learn more about Chinese customers first. (Other U.S. retailers at the time had also slammed the breaks on their China expansion efforts, including Neiman Marcus and Saks Fifth Avenue.)

Yet, Macy’s has also kept an eye on the market. Last Black Friday, Macy’s conducted a test on Black Friday that involved offering deals on select items in partnership with Alipay ePass, the digital payment arm of China’s e-commerce giant Alibaba Group BABA that processes payments, converts currencies and helps with shipping.

That test was “very successful,” Hoguet said. While Macy’s China plans remain very much in flux, with the company looking at a number of options, Hoguet seemed to suggest e-commerce would be at the heart of whatever it decides to do.

“Ten years ago when we were looking at China, it was – do we want to open or partner with someone to open lots and lots of stores,” she said. “Ten years later, as you might imagine, a lot more is focused on the Internet.”

At the same time, Hoguet was clear that China isn’t the only place Macy’s is studying. “As you might imagine, we get inundated with requests from all over the world for partnerships.”

U.S. regulators are reviewing the safety of Lumber Liquidators laminates

The U.S. Consumer Product Safety Commission said on Wednesday it was investigating Chinese-made laminates used by Lumber Liquidators Holdings Inc , after reports that the company’s flooring products had too-high levels of formaldehyde.

Commission Chairman Elliot Kaye said the regulator would test flooring products from Lumber Liquidators LL to determine whether they contained levels of formaldehyde, a carcinogen, that could be harmful to human health.

Kaye said the commission is “looking at months, unfortunately, not weeks” to determine the potential exposure, and he said it was too soon to tell whether the levels might warrant a possible recall of flooring products.

Lumber Liquidators said in a statement on Wednesday that it was cooperating with the safety commission and had turned over its own testing and safety information.

Formaldehyde is found in the glue that holds wood particles together in flooring boards. Laminate tops generally cover the boards and trap fumes released from the glue.

Lumber Liquidators came under fire after the CBS “60 Minutes” program claimed that laminates used by the company and made in China had unsafe levels of formaldehyde.

Kaye said the regulator’s probe was focused on Chinese-made laminates used by Lumber Liquidators for now, but the investigation could widen to other products or other companies if necessary.

The retailer’s net profit reached 3.61 billion kronor, or $423.2 million, in the first three months of 2015. That’s up from 2.65 billion kronor year-over-year. Analysts expected a net profit of approximately 3.37 billion kronor, according to The Wall Street Journal.

The company cited “well-received collections” that resulted in “good sales” to help beat expectations in its earnings release.

“We have made a very good start to 2015 – in terms of both sales and profits. Our attractive customer offering and strong expansion both through stores and online, as well as our work on continuous improvement, are among the reasons for increased market share gains and good profits,” said CEO Karl-Johan Persson in a statement.

However, the company is poised for slowing growth ahead due to currency fluctuations. “Although the strong U.S. dollar will affect our sourcing costs going forward, we will make sure that we always have the best customer offering in each individual market,” added Persson.

News that the retailer beat expectations comes as the company announced plans to open new 400 stores around the world earlier this year. Most of those locations will be built in China and the U.S, but H&M is slated to debut stores in entirely new countries as well, including South Africa, India and Peru.

Billionaire investor George Soros says there’s a 50-50 chance that Greece will leave the euro. He also warned that the country could go “down the drain” and the negotiations with the rest of the eurozone are a “lose-lose game.” Soros offered his opinion in a Bloomberg television interview that will air today. Greek Prime Minister Alexis Tsipras is still working to persuade creditors to provide more bailout funds to keep the struggling nation afloat. Tsipras’ government is expected to share an overhaul proposal with it’s euro partners by Monday.

2. In Europe, manufacturing nears a four-year high.

The Markit preliminary purchasing managers’ index rose to 54.1 in March from 53.3 in February, marking a near four-year high. That’s significantly above the 50.0 mark that separates manufacturing expansion from contraction. The expansion in commercial activity last month was much higher than anticipated and signals that the European Central Bank’s quantitative easing program is already kicking in to help boost the economy.

The Ellen Pao trial has captivated Silicon Valley over the past several weeks and is now coming to a head as lawyers on both sides of the gender-discrimination lawsuit get ready to begin their closing arguments. Pao is suing venture capital firm Kleiner Perkins Caufield & Byers, her former employer, for $16 million in lost wages and as much as $144 million in damages. She claims that the firm was a boys’ club that favored men for promotions while women floundered in lower and less remunerative roles.

4. Facebook looks to partner with media companies.

Facebook FB has been secretly meeting with at least half a dozen media companies about hosting their articles within the Facebook ecosystem rather than making its 1.4 billion users click a link that goes to an external site, reported the New York Times. Such a partnership would represent a shift by media companies, which have traditionally preferred to keep readers within their own sites in order to collect valuable data and deliver views for their own advertising. Facebook has been trying to calm those fears by proposing that media outlets could make money from advertising on its site that runs with the content. The social media site plans to start testing the new setup in the next several months.

5. Beijing will close its last major coal-fired power plant.

China’s capital city is trying to contain its pollution problem and plans to close the last of its four major coal-fired power plants next year. The four power plants will be replaced by gas-fired stations that will be able to provide 2.6 times more electricity. China is the world’s biggest carbon emitter, and Beijing is one of the hardest hit cities where pollution levels averaged more than twice China’s national standard last year. The move to close the plants is part of a broader trend in the nation to address environmental damage. Beijing intends to slash annual coal consumption by 13 million metric tons by 2017 from its 2012 levels.

China’s economy stuck in a winter slumber

It’s the first full week of spring, but the Chinese economy shows no signs of waking from a winter slumber.

The initial reading of HSBC’s manufacturing purchasing manager’s index (PMI), a popular measure of business expansion or contraction, is grim: the lowest level since May 2014, a further decrease from low readings in late 2014, and weak employment figures. The so-called flash reading of 49.2 (a final figure will be out at the end of the month) indicates that broad industries in China continue to slid in a slowing economy initially caused by a real estate downturn.

“The drag from deflating construction activity in the real estate sector will remain with us for a while,” HSBC analysts Frederic Neumann and Qu Hongbin wrote today.

Red is expansion, grey is contraction. March is bad.

The Chinese media have said fewer migrants returned to cities following the Chinese New Year, and the PMI showed employment dips in March. China’s leaders often say employment is a top concern. On Tuesday analysts widely said the dour economic readings would translate into more stimulus in China—monetary and maybe fiscal. Premier Li Keqiang pledged to keep the economy growing by 7% in 2015 and the insiders are saying, “By god he’s going to keep his word.”

The benchmark interest rate in China is still above 5%; in the U.S. it’s 0%. In other words, China has room to work.

The first of many influential PMI readings this year might determine how much its central bank maneuvers.